The Securities and Exchange Commission has proposed to extend by two years a temporary rule that establishes an alternative means for registered investment advisers that are also registered as broker dealers to meet the requirements of Section 206(3) of the Investment Advisers Act of 1940 (the “Advisers Act”) when they act in a principal capacity in transactions with certain of their advisory clients. Absent SEC action, Rule 206(3)-3T will sunset on December 31, 2012.
The SEC adopted Rule 206(3)-3(T) as a temporary rule in September 2007, as a consequence of the Financial Planning Association v. SEC decision (the “FPA Decision”). In the FPA Decision, the Court of Appeals for the D.C. Circuit threw out Rule 202(a)(11)-1 under the Advisers Act, which provided, among other things, that fee-based brokerage accounts were not advisory accounts and were thus not subject to the Advisers Act. The FPA Decision meant that investment advisers to fee-based brokerage accounts (such as “wrap” accounts) had to register with the SEC as investment advisers, and thus were subject to limitations on principal transactions with their clients and other fiduciary responsibilities.
Please see full alert below for more information.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.